In a fillip to Foreign Direct Investment in retail in India, Narendra Modi government today eased operating norms for foreign-owned single-brand retailers, allowing for more lenient local sourcing and better market access through online sales. So far, foreign single-brand retailers were required to set up brick-and-mortar stores, as a rule. The Union Cabinet, on Wednesday, allowed single-brand retailers to start online sales, waiving the previous condition. The Cabinet also expanded the definition of mandatory 30 per cent domestic sourcing norm for single-brand retailers. The issue of foreign direct investment in single-brand and multi-brand retail in India is a political hot potato.
The government last year allowed 100 per cent FDI in the single-brand retail sector, following which the opposition parties questioned the move. In the past, the UPA government led by Manmohan Singh also tried to open the retail sector for foreign direct investment which the BJP had opposed saying it will crush our retailers.
In another important decision, Commerce and Industry Minister Piyush Goyal pointed out that due to the ongoing trade tension, companies are looking towards alternatives to set up their businesses. Hence, easier FDI norms will attract more attention due to which the norms have been neutralised today to enhance the ease of doing business, he added. Contract manufacturing is gaining prominence lately and it is important to facilitate the contract manufacturing sector by easing the FDI norms. Hence, the government has allowed 100 per cent FDI in contract manufacturing via automatic route, he further added.
To give some comfort to the traders in coal mining and its associated sectors, the cabinet has also approved relaxation in its FDI norms. 100% FDI has now been allowed in coal mining, its sale and associated infrastructure via automatic route, the minister said in a press conference. 100 per cent FDI in contract manufacturing under automatic route has also been allowed, which is aimed to boost domestic manufacturing, he added. The cabinet minister also announced the provision of 26 per cent FDI in digital media, which was previously restricted to the print media only.